Target Markets Aims to Win

Nearly five years ago, a group of program specialists gathered in Tempe, Ariz., for the first summit meeting of a budding industry organization called the Target Markets Program Administrators Association. The brainchild of Glenn Clark, owner and president of Wilmington, Del.-based Rockwood Programs Inc., the new association seemed to hit the mark for many in the program marketplace.

“It definitely looked like it would fit a need that we had,” said Art Seifert, president of The Lighthouse Companies and current president of the Target Markets association. For Seifert, and other attendees at the first conference, Target Markets seemed to offer something no other association had done before.

“There really wasn’t anything out there that specifically addressed program managers,” Seifert said. “We’re not a general wholesaler so we don’t really fit the AAMGA (American Association of Managing General Agencies) model. This was the first thing that I had seen.”

The National Association of Professional Surplus Lines Offices (NAPSLO) and AAMGA had been the traditional associations serving general wholesale agencies for years, but there was no organization that met the unique needs of program professionals.

“Napslo and AAMGA … their target clients are general wholesalers, guys that have the pen for 17 different companies,” Seifert noted. “That’s not what we do. Every one of our programs has a single carrier or in some cases maybe two carriers and that’s it; that’s the only place we place that business.”

And that’s exactly how the vision of Target Markets began.

The idea for an association dedicated solely to the needs of program administrators was originally conceived in 1998.

“We were going to remake InsGroup, a retail agency association, into an association of program administrators,” Clark said. InsGroup, owned by reinsurance broker EW Blanch, had 66 members and Clark was its president. Then in 2000, the Rockwood management team had a buy out and bought their way out of EW Blanch. “We never could get EW Blanch to fund the start of this new association, so we started to do it on our own,” he said.

The right time to begin
When the association held its first meeting in October 2001, the industry was at the beginning of yet another hard market cycle. Rates were firming and many carriers were leaving the marketplace. The timing seemed to be ripe for an association focusing on the needs of the program marketplace.

“The timing was good,” Seifert noted, adding that a number of key carriers writing programs were exiting the market. Program administrators were faced with moving their programs and limited options.

“Kemper did programs; they’re no longer here. Reliance did programs; they are no longer here. Commonwealth Risk Management, TIG, and Frontier … they’re no longer here.” Seifert added that there is always a need to move programs when something “goes bump in the night.” And Target Markets provides the ideal venue for building relationships with markets so administrators can handle those “bumps” with ease.

“The program market was largely underserved by the other organizations that were out there,” said Rick Weidman of Clarendon Insurance, one of the first carrier members to support Target Markets. “We recognized a need in the market for something that was a little more focused on the needs of program specialists.” Clarendon has been in the program marketplace since 1992 and writes about $1.7 billion in program business.

American International Group’s program division also signed on to the new association’s model at the onset.

“We were first interested because this association is really designed for program administrators in the definition of how we see them,” said Terri Moran of AIG Programs, who also serves on the Target Markets advisory board of directors as well as the education committee.

“Program administrators typically are brokers that have created an expertise in a homogenous class of business; they have a deep understanding of how to underwrite the business for a profit.”

AIG Programs Department of Lexington Insurance Company wrote $1.7 billion in program business in 2004.

Industry watchers zero in
Target Markets was founded on the premise that meetings are for business only, and focuses on five primary themes: access to markets, networking with peers (owner focused), cross-selling, technology and skills building. The business-only environment of its two annual conferences has attracted 31 major carriers writing programs today and 171 program administrator members. But in its early days, there were a few skeptics.

“Being a new entity, it was a sales job to get carriers and vendors to come on board,” said Ray Scotto, executive director of the association. “But program administrators all felt it was a good idea.”

Today, most in the industry have taken note of the association’s growth and development and few skeptics remain.

“How people view us now can be seen by the folks that are involved in the group,” Scotto added. That list includes carriers such as AIG, Clarendon, Fireman’s Fund, Benfield Inc., St. Paul Travelers, XL Programs, GE Commercial Insurance, CNA and Zurich North America, just to name a few.

“Like anything else, there are a lot of folks that ask about its integrity and the quality of its membership and you hope that over time people will migrate more to the ideals that you are promoting,” Clarendon’s Weidman said. “We have had major groups, like Benfield, that have helped.” Major supporters, such as Benfield, have in many ways made it possible for Target Markets to survive, Weidman added. “Now we have a cross section of virtually anybody that’s anybody [in programs].”

“Target Markets is the premiere nexus point for excess specialty program professionals,” said Russ Smith of Fireman’s Fund. Smith added that being involved with the association has helped to increase the carrier’s business and flow of opportunities. “It’s not unusual to have 25 to 30 one-to-one meetings in the two days business is conducted [at the conference].” Fireman’s Fund underwrites more than 125 programs in excess of $400 million in sales.

Some retailers may also benefit through better access to markets via the Target Market’s Target Programs Web site (www.targetprograms.com). Target Programs, launched in 2003, is an online platform that allows retail agents to search for program markets for free. Target Programs provides information about the Target Market’s program administrator member, and the programs they offer. However, the Web site is only available to Target Market administrator members and not all members participate in the program.

Raising the bar
In an effort to quantify the quality of work that program administrators perform, Target Markets began conducting a voluntary benchmark survey to identify best practices among its membership. Its first Program Benchmark Survey was performed in 2003 and the second will be conducted in 2005. The results are being used to set a standard of criteria for members to be able to evaluate their own program business, as well as compare their business to others.

The benchmarking data will also be used to implement an eventual Target Markets designation for program administrators. The association’s leadership hopes to have the designation in place by 2006.

“What we are heading towards is almost like a seal of approval–a mark of excellence,” Clark said.

“We knew that while we were developing the survey it would become the basis of what we would look at to evaluate companies and how they operate to come up with a standard of best practice,” Scotto said. “It should fulfill a lot of due diligence that a lot of carriers would perform on a program administrator. We’re going to really raise the level of expectation and competency from program administrator to program business.”

Clarendon’s Weidman said such a designation will make the evaluation process between carrier and program manager much more effective and efficient.

“Say we are looking for new relationships and opportunities; if we can identify an agency that has met certain best practices, I would gravitate more to a general agent that has met those practices,” Weidman replied.

Target Markets creates another level for program administrator members to aspire to, said AIG’s Moran.

“Our challenge and our hope is that at the next [cycle] go around that we’ve gotten smarter and we do not create the same disruption in the program marketplace,” Moran said. “There were program administrators that actually went out of business because they couldn’t find a place to put their business,” Moran replied, referring to program conditions during the last hard market. “Perhaps through an association of program administrators we can all raise the level of professionalism.”

Targeting technology
An area where the association could really make a difference for its members is in technology, Seifert said.

“Technology is huge,” he said. “It’s probably the single most important issue we are all going to facing over the next three to four years.”

Seifert, who has made technology a top priority of his tenure as president, hopes the association’s mass will entice technology vendors to create a technology solution that will better meet the needs of program managers.

“Is there a way that we could take our collective needs and have a program developed that meets 70 percent of our needs and share collectively in that expense, and then be able to customize the last 30 percent to your own organizational needs?” he asked. Seifert added there’s a lot of money wasted in current technology programs available to program specialists because of trial and error when purchasing new systems. “We’re too small a universe,” he said.

Part of the technology problem program administrators face is understanding and knowing how to effectively and accurately collect critical data.

“One of the things Target Markets is working on is helping members realize exactly what kind of data they need to be collecting, and through our technology committee trying to come up with ways to gather that data,” Seifert explained.

At one time or another every program administrator faces the fact they have to move a program, and quickly, he said. “If you don’t own your data and don’t control your data and haven’t collected your data, it’s a very difficult and expensive to move your program.”

Targeting the future
“This is only a four-year old association; it has come a long way in a very short period of time, but needs to continue to evolve,” said AIG’s Moran. “In the beginning a lot more emphasis was placed on the networking aspect, but as we go into the next few years we are trying to make sure education is more a part of this.”

Weidman noted, “We want an association that is known for quality.”

Scotto and Clark both agreed that the organization continues to take shape.

“Some of the things we want to see continue to evolve is a stronger committee component, a stronger involvement from the membership itself,” Scotto said. “The only way we’re going to stay viable is if we are providing what our members need.”

Clark added that to be a member the company must be involved. “When you sign up we expect you to be on committees, come to meetings … we expect you to participate,” he said. “The idea is about making our businesses better. We don’t need 1,000 members to make each other better.”

Target Markets has an unofficial membership cap of about 250-300 program administrators.

“We don’t want people to sign up and pay their membership and sit back,” Scotto said.

Members are also pushing for increased access to markets, notably access to markets that will write new programs or smaller programs.

“The biggest challenge today is start ups,” Moran said, who noted that AIG is one of the few carriers that writes new program business today.

While the association has reined in most major carriers writing program business, they are still targeting regional or international carriers that will do smaller programs, Clark said.

“It’s very important that we get the carriers who will do the smaller programs,” he said. “Every one of us in our membership committee was a small program at one time. One of the most significant issues in our business is how do you grow or how do you start of a new program?”

“Our goal is to find companies that are interested in forming a relationship with a lot of the administrators in our group and are looking to become a business partner with them,” Scotto said. “Whether that’s a big company that has a lot of programs or a smaller company that is looking to expand.”

Seifert noted that the program marketplace is definitely growing in the right direction for Target Markets members.

“A lot of the reports now suggest that the insurance companies that really make money are the ones that develop specialization,” he said. “And that bodes well for us because what a good program manager brings to the table is a level of underwriting experience that the companies can’t match. So as the companies realize their best shot at profitability is to rely on specialization, they’re going to rely more on program managers to provide that.”

Topics Carriers Agencies InsurTech Excess Surplus Tech AIG